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What’s the Rationale for the TIAA-Everbank Merger?

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Rationale for the merger

As we saw in the first part of this series, TIAA is acquiring Everbank (EVER) in a $2.5 billion transaction. Everbank shareholders will receive $19.50 in cash per share. The deal is scheduled to close in 1H17.

TIAA has been increasing its reach, growing from its roots in pension funds and asset management to offering a full suite of financial services to its target market—primarily academics and government servants. TIAA has almost $900 billion in assets under management.

Everbank is a major player in the mortgage origination space. TIAA is looking to take some of that mortgage origination and put it on its balance sheet. Mortgage servicing is another asset that Everbank generates. It would be a good fit in some of TIAA’s funds.

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Management comments

“I am very excited to welcome EverBank to the TIAA team,” said Roger W. Ferguson, Jr., president and CEO at TIAA. “EverBank’s complementary capabilities and two decades of profitability make this an excellent investment and a great strategic fit for TIAA. Together, we look forward to bringing an enhanced level of service and an expanded range of financial solutions to our millions of loyal customers and the institutions we serve.”

“Saving is essential to reaching important life goals. Whether building emergency savings or buying their first home, customers want to turn to a company they trust,” said Kathie Andrade, chief executive officer of TIAA’s Retail Financial Services business. “Helping our clients succeed throughout their lives is at the heart of TIAA’s mission, and the reason our employees come to work each day.”

Merger arbitrage resources

Other important merger spreads include the Valspar (VAL) and Sherwin-Williams (SHW) deal and the Whitewave (WWAV) and Danone deal. For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the financial sector should look at the S&P SPDR Financial ETF (XLF).

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